Correlation Between Direxion Shares and Freedom Day
Can any of the company-specific risk be diversified away by investing in both Direxion Shares and Freedom Day at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Direxion Shares and Freedom Day into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Shares ETF and Freedom Day Dividend, you can compare the effects of market volatilities on Direxion Shares and Freedom Day and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Direxion Shares with a short position of Freedom Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Shares and Freedom Day.
Diversification Opportunities for Direxion Shares and Freedom Day
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Direxion and Freedom is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Shares ETF and Freedom Day Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Day Dividend and Direxion Shares is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Direxion Shares ETF are associated (or correlated) with Freedom Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Day Dividend has no effect on the direction of Direxion Shares i.e., Direxion Shares and Freedom Day go up and down completely randomly.
Pair Corralation between Direxion Shares and Freedom Day
Given the investment horizon of 90 days Direxion Shares ETF is expected to under-perform the Freedom Day. In addition to that, Direxion Shares is 2.26 times more volatile than Freedom Day Dividend. It trades about -0.01 of its total potential returns per unit of risk. Freedom Day Dividend is currently generating about 0.06 per unit of volatility. If you would invest 3,114 in Freedom Day Dividend on November 28, 2024 and sell it today you would earn a total of 303.00 from holding Freedom Day Dividend or generate 9.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.46% |
| Values | Daily Returns |
Direxion Shares ETF vs. Freedom Day Dividend
Performance |
| Timeline |
| Direxion Shares ETF |
| Freedom Day Dividend |
Direxion Shares and Freedom Day Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Shares and Freedom Day
The main advantage of trading using opposite Direxion Shares and Freedom Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Shares position performs unexpectedly, Freedom Day can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Freedom Day will offset losses from the drop in Freedom Day's long position.| Direxion Shares vs. Strategy Shares | Direxion Shares vs. Freedom Day Dividend | Direxion Shares vs. Franklin Templeton ETF | Direxion Shares vs. iShares MSCI China |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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